Is Your Foreclosure Allowed?

Is Your Foreclosure Allowed?

There once was a time that when you borrowed money for a mortgage from a bank, you made your mortgage payment to that bank. Eventually, the banks decided it was a great idea to package and sell off your mortgage to other banks, or to loan servicers. So although you may have borrowed money from your local bank, a new company may have stepped in and directed you to start making your mortgage payment to them. Although it is not entirely illegal, when your mortgage is passed around from one entity to another, the paperwork behind all of those transactions could be a little chaotic, making your mortgage a hazard. It’s when the paperwork gets sloppy that short cuts are taken. However, just because a bank or servicer is cutting the corners, it doesn’t inevitably mean that you have to suffer.

I recently went to trial for one of our clients and this sloppy paperwork became a problem for the bank. The borrowers took out their mortgage with “Bank A.” “Bank A” at some point tried to sell or transfer the client’s note and mortgage to “Bank B.” “Bank B” was now attempting to foreclose against our client. The problem is that “Bank A” wasn’t the unit transferring the note and mortgage to “Bank B.” Instead, “Company A”, a company owned by “Bank A,” was attempting to transfer the note and mortgage to “Bank B.” This in of itself isn’t a problem until it gets sloppy. If it can be proven to the court that “Bank A” first gave the note and mortgage to “Company A”, and authorized them to transfer those documents to “Bank B” then no problem, however, sloppy paperwork hindered all of this.

The concept of who has the right to foreclose against you is called standing, and one of the ways to prove to a court someone has standing is to demonstrate the relational process between the unit who loaned you the money and the unit who is trying to foreclose. Just because the appellant in a foreclosure says they “have the note” doesn’t necessarily mean they are the sound unit to foreclose against you. They still need to prove to the court the history of how and to whom the note and mortgage was transferred.

The problem in this specific trial was a lack of adequate evidence to prove how the note and mortgage was transferred from “Bank A” to “Company A.” Without that connection, the transfer of the note and mortgage from “Bank A” to “Company A” to “Bank B” is incomplete. In this situation we say “Bank B” lacks standing to foreclose – meaning “Bank B” is not the proper unit to try and foreclose our client’s home. This defense was raised and we were able to successfully show the court that “Bank B” was not the suitable unit to foreclose because they couldn’t prove the complete history of the note and mortgage. Without this crucial component, the court was required to discharge the case and rule in favor of our client.

How a note and mortgage is transferred between entities can sometimes be complicated to isolate. Proving the history of the note and mortgage is essential for the appellant to prove their case, and expert legal guidance can aid in determining whether your note and mortgage were properly transferred.